A company has a $36 million equity portfolio with a beta of 0.9. The futures price on

Fantastic news! We've Found the answer you've been seeking!

Question:

A company has a $36 million equity portfolio with a beta of 0.9. The futures price on the S&P index for a contract delivering in 6 months is currently trading at 900. Futures contracts on $250 times the index can be traded.

What trade is necessary to increase the beta to 1.2 over the next 4 months?

O Long 48 futures contracts and close out the position in 4 months

O Long 48 futures contracts and close out the position in 6 months

O Short 48 futures contracts and close out the position in 4 months

O Short 48 futures contracts and close out the position in 6 months

O Short 192 futures contracts and close out the position in 6 months

Related Book For answer-question

Fundamentals of Futures and Options Markets

ISBN: 978-0132993340

8th edition

Authors: John C. Hull

See More Books

Posted Date: Oct 12, 2023 04:15 AM

See More Questions

KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
1. Assume that you are an equity portfolio manager with a well-diversified portfolio valued at $2.5 million with a beta of 1.1, but you have a positive outlook on the short-term prospects of the...
1.A company has a portfolio of stocks worth $100 million. The beta of the portfolio is 1.5. The company would like to use the CME December futures contract on the S&P 500 to protect the value of...
Addison, Inc. makes a single product, an indoor fireplace. Data for last year is as follows: Selling price per fireplace Manufacturing costs: Variable per unit produced: Direct materials Direct labor...
In about 1657 Otto von Guericke, inventor of the air pump, evacuated a sphere made of two brass hemispheres. Two teams of eight horses each could pull the hemispheres apart only on some trials, and...
Using the various ethical discussions in the first three chapters as your guide, evaluate the actions of McCoy, Stephen, and the rest of the group from an ethical perspective?
What is the calculation for coupling hub shrink fit?
Sony Corp. packed a shipment of videocassette tapes into a 40-foot ocean container for transport to England. Sony put the tapes into 1,320 cardboard cartons, then strapped the cartons onto fifty two...
Create a program that will determine the Quadrant Number of the given integers. Enter your x axis: 2 Enter your y axis: -3 Quadrant IV Enter your x axis: -2 Enter your y axis: 3 Quadrant 2 Enter your...
(a) Could 25 g of argon gas in a vessel of volume 1.5 dm3 exert a pressure of 2.0 bar at 30C if it behaved as a perfect gas? If not, what pressure would it exert? (b) What pressure would it exert if...
Apple slices 4 mm thick are exposed to sulfur fumes in a sulphuring house before drying. If the surface concentration of SO2 is 0.1 mol SO2/m3 , calculate how long it will take for the concentration...
A box was found to have a volume of 9.56 cm3. What is the boxes volume in units of cubic inches. use dimensional analysis. Show all work please
Discuss the reasons why the net present value investment appraisal method is preferred to other investment appraisal methods such as payback, return on capital employed and internal rate of return.
1. What is Opportunity Cost of Credit 2. What are the other charges and their Effect on Cost of Credit
Most borrowers only pay attention to the monthly payment when taking out a loan. Why do you think this is? How can this benefit the lender?
Introduce the case study including challenges (global trade is more difficult for small business than large) in the environment (back, country, finance sector) explained and the problem being solved...
The accompanying table shows the annual growth rate for the years 2000-2011 in per capita emissions of carbon dioxide (CO2) and the annual growth rate in real GDP per capita for selected countries....
Consider the function f and its graph. a. Estimate the zeros of the area function b. Estimate the points (if any) at which A has a local maximum or minimum. c. Sketch a graph of A, for 0 x 10,...
Suppose that the risk-free zero curve is flat at 6% per annum with continuous compounding and that defaults can occur at times 0.25 years, 0.75 years, 1.25 years, and 1.75 years in a two-year plain...
In the Chicago Board of Trades corn futures contract, the following delivery months are available: March, May, July, September, and December. State the contract that should be used for hedging when...
Suppose that in Problem 20.17 the correlation between the S&P 500 Index (measured in dollars) and the FT-SE 100 Index (measured in sterling) is 0.7, the correlation between the S&P 500 index...
How much heat is to be added to convert $4 \mathrm{~kg}$ of water at $20^{\circ} \mathrm{C}$ in to steam at 8 bar and $200^{\circ} \mathrm{C}$. Take $C_{p}$ of superheated steam as \(2.1...
What do you understand by mechanical and thermal efficiency? A steam plant uses 3 tonne of $\mathrm{coal} / \mathrm{h}$. The steam is fed to turbine the output of which is $4 \mathrm{MW}$. The...
Determine the total heat content per unit mass at the following state using the steam tables. Assume ambient pressure to be $100 \mathrm{kPa}$ and $C_{P}$ $=2.0934 \mathrm{~kJ} / \mathrm{kg}$....

A company has a $36 million equity portfolio with a beta of 0.9. The futures price on

Question:

Expert Answer:

To increase the beta of the companys equity portfolio from 09 to 12 you need to take a position in S... View the full answer

Fundamentals of Futures and Options Markets

Students also viewed these corporate finance questions